A vehicle to help Bay State cities and towns fund infrastructure improvements to support increased development tops the legislative wish list for the National Association of Industrial and Office Properties, while other Massachusetts real estate-related groups are also gearing up for a busy 2001 on Beacon Hill. The two-year session is slated to kick off early next month.
According to CEO David Begelfer, the “top priority” of NAIOP’s Massachusetts chapter is its District Improvement Financing measure, one which would allow communities to make infrastructure upgrades using bonds that would then be paid off by real estate taxes emanating from increased commercial uses.
“It’s very important knowing how municipalities and the state are having trouble trying to pay for infrastructure [modernization],” Begelfer told Banker & Tradesman last week. Given the tight fiscal climate, one exacerbated by the $14 billion Big Dig project, Begelfer said he is optimistic, even though this is the bill’s first time through the legislative ringer.
“This is fairly well-supported, so we think it has a good chance of success,” he said. “We’re quite excited about moving it forward.”
DIF resembles certain elements of the tax increment financing plans that communities including Marlborough and New Bedford are now using to finance such improvements as new roadways, septic systems or parking garages. But whereas those monies are paid off years later by the developer in what amounts to a deferred tax payment, the DIF payback would not be targeted to a specific project. Often, Begelfer said, a city or town is missing one key ingredient to promote added commercial construction.
NAIOP’s bill, which has yet to be assigned a number, was filed by state Sen. David P. Magnani, D-Framingham.
In another effort to spur development, NAIOP is supporting the creation of a state revolving infrastructure bank that would finance state and local transportation projects. Promoted by Rep. Joseph C. Sullivan, D-Braintree, the bank would provide direct tax-exempt debt financing to the state, municipalities and even developers.
“It could be for anyplace where there’s a gap in available funds,” said Begelfer. Sullivan is chairman of the House Transportation Committee.
Playing defense for its members, NAIOP is also backing a bill that would clarify what constitutes state financial assistance in relation to policies in place by the Massachusetts Environmental Policy Act. The MEPA office requires that any project receiving funds from the state must undergo an environmental impact report, a lengthy procedure that can set back a development substantially. NAIOP argues that investment tax credits issued to firms going into a designated Economic Target Area, or for those cleaning up brownfields sites, should not trigger that mandate.
Another ETA revision supported by NAIOP would provide the investment tax credit to those firms that go into such an area and open a facility using the sale/leaseback model. As it is currently written, only companies owning their buildings are eligible for the credit.
“The whole purpose of this was to encourage companies to move into these areas, and it should be irrelevant if they own it vs. lease it long-term,” Begelfer said. “The last thing a community wants to do is lose a company on what amounts to a technicality.”
Major Concerns
On the regulatory end, NAIOP is asking state officials to alter wetlands regulations to allow developers to replicate waterways en masse. The current policy requires that any developer disturbing a wetlands replace it elsewhere on his or her property. A more useful approach, according to NAIOP, would be to allow developers to pool their mandates together to build or restore a larger wetlands elsewhere.
“Most other states seem to do it that way,” Begelfer said. “It really makes a lot more sense.”
Other real estate groups with a full agenda in 2001 include the Greater Boston Real Estate Board, the Boston Society of Architects and the Associated Subcontractors of Massachusetts. GBREB wants the state to clamp down on communities which the association claims are exceeding the Title 5 sewage regulations. Title 5 mandates close monitoring of underground septic systems, but GBREB claims many cities and towns are exceeding the regulations to limit growth.
GBREB also wants to spur new housing by limiting lawsuits against such projects, and is also hoping to protect landlords from forced access by telecommunications providers into commercial buildings.
The BSA will be promoting construction reform at the state level, hoping to revive the Cellucci administration’s previous efforts to change the way public projects are financed and administered.
Ironically, the ASM has been among the most vocal opponents of the reform effort, charging it would place its membership at a competitive disadvantage. Executive Director Monica Lawton said last week that her group, which helped quash the initiative last year, will be closely monitoring the situation again in 2001, but added that it appears dormant for the time being. The ASM is most interested in protecting the filed sub-bid provision which requires a separate bidding process for public projects, with the subcontractor and the general contractor each making their own bids on such undertakings.
For the time being, ASM’s biggest concern is the growing trend of utilities such as Boston Edison and Boston Gas to provide free equipment such as boilers to customers who sign up for service, hoping to establish a long-term relationship. The problem, according to Lawton, is that private contractors are being pushed out of both residential and commercial projects because they cannot compete against the free or reduced offers. Lawton said such national players as KeySpan are pushing into the Northeast, often buying up large plumbing, mechanical and electrical contractors to perform the work. KeySpan is the new owner of Eastern Utilities, which controls Boston Gas, Colonial Gas and Essex Gas.
Lawton and a group known as the Massachusetts Alliance for Fair Competition maintain that the free equipment is funded partly from ratepayers. If they wish to go up against private firms, ASM and the coalition maintain that the utilities should be required to either divulge their finances related to such programs or establish a separate division altogether.
“This is becoming more and more prevalent, and contractors are finding it is getting harder and harder to compete,” Lawton said.
On another matter, the ASM hopes to curb so-called “pay-if-paid” language which is increasingly finding its way into construction contracts. Such clauses, deemed illegal in many states, absolve the general contractor from paying the subcontractor if the GC is not compensated by the developer. Interestingly, the ASM has joined forces with the Associated General Contractors of Massachusetts in a bill that would set strict guidelines when such a practice could be instilled. Among other things, the GC would have to make substantial efforts to get paid, and also file a “notice of contract” at the start of a job, one which provides protection against deadbeat developers.
